What UBS Fight With Bloomberg Over Client Data Means for FAs

Most financial advisors recognize that data-analytics have grown in significance for their clients. But a parallel trend has also developed: an increase in intra-industry disputes about who gets to repackage data and offer it to clients as part of portfolio-management tools.

In mid-July, Bloomberg Finance filed a lawsuit in New York federal court against UBS over precisely that issue. Bloomberg alleges UBS, through its portfolio and risk analytics tool, known as UBS Delta, gave clients (and possibly rival data-supplying firms) unpaid access to Bloomberg data available from Bloomberg Terminals. That's data for which Bloomberg subscribers pay dearly – more than $1,600 a month for each individual subscriber. Bloomberg’s fight with the wirehouse began, however, only after Bloomberg purchased its own risk analytics tool, known as POINT, from Barclays in 2016.

The row illustrates how big players in the financial services industry, whether investment banks, wealth managers or fintech companies, have set seizing control of data and repackaging it for clients as a top priority. Their focus follows forecasts that data consumption will only grow in significance.

By 2020, 90% of large enterprises will generate revenue from data-as-a-service, according to a 2017 report by International Data Corp., a consulting agency that focuses on advisory services and consumer technology markets.

“Enterprises’ ability to create, derive, and manage high-value data for their own use – and gain financial leverage by packaging some of that data for the marketplace – will quickly become an important metric in enterprise valuation. Similarly, relevant and high-value data will be a key component determining an enterprise’s value and power in the world of digital developers and ecosystems. Establishing a critical mass of external data feeds will also be a critical ingredient for any AI-based digital services and solutions,” the IDC report says.

For some financial advisors, particularly those who pay for Bloomberg data themselves, the Bloomberg and UBS quarrel appears to hinge on nothing more than money.

“Bloomberg does a great job with content. So UBS needs to pay for it,” says Ross Gerber of Gerber Kawasaki Wealth and Investment Management in Santa Monica, Calif., an advisory firm with more than $700 million in assets under management.

Other advisors, however, hear echoes of their own struggles with data suppliers in the battle.

“Finding good research and data that is affordable is always something that we are looking for, but I think advisors are aware of only a few sources of true data and they are all repackaging it in some sort of fashion,” says Stephen “Scotty” Scott, an advisor at Abacus Planning Group, a Columbia, S.C.-based firm which has more than $1 billion in assets under management.

Abacus is “big enough to do so, and would like to customize” its client portals by repackaging and presenting data under its own brand. Yet such a scenario remains out of reach in terms of price because of what the advisory firm’s outside provider of an API (application programming interface) services would charge to let Abacus control data in that way, Scott says.

Before their tussle landed in court, UBS told Bloomberg that, starting this month, it will no longer use Bloomberg data in its portfolio analysis and risk management system, known as UBS Delta, according to the lawsuit.

If and when UBS makes the switch to a new data provider for UBS Delta, however, it may very likely disclose Bloomberg data to Bloomberg’s rivals, according to a prediction made in Bloomberg’s lawsuit.

“Bloomberg believes that in the process of replacing Bloomberg as a source of data within UBS Delta, UBS will disclose Bloomberg’s data to Bloomberg’s competitors, or will provide those competitors with information about Bloomberg’s data, that would allow the competitors to ‘validate’ or otherwise improve their own data, resulting in irreparable harm for which money damages are an insufficient remedy,” its lawsuit states.

Bloomberg is asking the court to order UBS to delete and purge Bloomberg data from “all customer-facing instances.” Bloomberg is also asking the court to order UBS to require its UBS Delta customers delete and purge all Bloomberg data, and have the same directive apply for any other third-party which gained access to Bloomberg data through UBS.

Bloomberg also asks the court to take steps to prevent future siphoning of its data and issue an order barring UBS from “directly or indirectly disclosing Bloomberg data … in connection with the replacement of Bloomberg data as a source of data for UBS Delta.”

“Bloomberg does a great job with content. So UBS needs to pay for it.”
Ross GerberGerber Kawasaki Wealth and Investment Management

According to UBS’s website, the bank has some 130 clients, including family offices, pension schemes, and private banks, which rely on UBS Delta. The tool began as a front-office fixed income analytics application but UBS expanded its uses to cover additional asset classes.

In its lawsuit, Bloomberg alleges UBS violated an agreement about how it could use Bloomberg-provided data. Its agreement with UBS to provide data, initiated in 1998 and revised in 2005, bars the bank from redistributing proprietary data through a portfolio analysis and risk management system, Bloomberg claims.

“[U]nder the agreements at issue, UBS, like all Bloomberg customers, cannot convey Bloomberg’s highly valuable, proprietary data directly to its own customers in a manner that would tend to obviate the customers’ need to purchase their own Bloomberg license, because of the serious harm such unauthorized use poses to Bloomberg’s core business,” the lawsuit states.

UBS’s 2017 decision to enter into a five-year deal to sell UBS Delta to London-based StatPro Group, a provider of cloud-based portfolio management and analytics services, prompted Bloomberg’s initial investigation of “UBS’s misuse of other Bloomberg services,” the lawsuit states.

The UBS and StatPro deal calls for three to five years of transitioning before StatPro takes over the UBS Delta service entirely. But already UBS employees who use Bloomberg Terminal accounts have become StatPro employees, according to Bloomberg’s lawsuit.

During its investigation triggered by the proposed sale of UBS Delta to StatPro, “Bloomberg discovered that — contrary to the terms of the 1998 licenses and the 2005 amendment — UBS was allowing its clients to access and download a vast trove of proprietary Bloomberg data,” the lawsuit alleges.

Bloomberg seeks a court order requiring UBS to pay retroactively the price of licensing the Bloomberg data to all of UBS Delta’s customers – and to any other unauthorized third party recipients who got the data through UBS’s alleged “impermissible use,” the lawsuit states.

UBS hired the law firm Cahill, Gordon & Reindel to defend against Bloomberg’s claims. The bank is scheduled to file a formal answer with the court on Aug. 13. In a statement issued this week through its spokesperson for this story, UBS wrote: “We completely disagree with Bloomberg’s view. They were aware of and contractually agreed to our use of the data years ago. We’re confident in our position and will take appropriate legal steps to defend ourselves.”

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Bloomberg, which hired the law firm Quinn Emanuel Urquhart & Sullivan to pursue the claims against UBS, also issued a statement about the dispute through a spokesman: "We have multiple solutions that we believe would solve UBS’s issues. Despite our repeated efforts over several months, UBS has elected not to work with us to find a solution and has continued to misuse our data, which is why we were left with no choice but to pursue litigation. We expend significant resources on our data business and will always protect and defend our intellectual property," he wrote.

Two years ago, when Bloomberg acquired POINT, the Barclays’ risk and portfolio analytics tool, it boasted in a press release that the purchase would allow it “to incorporate sophisticated models and analytics … and augment these with data, news, alerts, mobile capabilities.”

In April, in a move that may or may not be related to the court battle with Bloomberg, UBS stopped sending Bloomberg its investment analysts’ equities research data feeds, including price targets and estimates. At the time it announced its plans to halt the feeds, UBS said it was doing so to comply with the European Union’s MIFID II (markets in financial instruments directive) rules. The European rules, which became effective in January, are aimed at reducing conflicts of interest and stipulate that asset managers unbundle the cost of investment research from trade executions.

“We are looking for ways to better protect the value of our research content. We are therefore suspending distribution of these data sets (i.e., ratings, price targets and estimates) from certain third-party platforms, which we believe do not meet our requirements,” UBS officials said in a memo disclosed by the Financial Times at the time.